<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(x) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended November 30, 1996 or
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission file number 0-6708
Nautica Enterprises, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-2431048
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
40 West 57th Street, New York, N.Y. 10019
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212)541-5990
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of Common Stock outstanding as of January 10, 1997
was 42,044,791.
<PAGE> 2
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
NOVEMBER 30, 1996
(Unaudited)
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information:
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
As at November 30, 1996 and February 29, 1996........... 2
Condensed Consolidated Statements of Earnings
For the Nine and Three Month Periods Ended
November 30, 1996 and 1995.............................. 3
Condensed Consolidated Statements of Cash Flows
For the Nine Month Periods Ended
November 30, 1996 and 1995.............................. 4
Notes to Condensed Consolidated Financial Statements....... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 6
Part II - Other Information......................................... 9
</TABLE>
<PAGE> 3
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
ASSETS
November 30, February 29,
1996 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 77,864,927 $ 61,047,522
Accounts receivable - net 74,268,431 45,704,169
Inventories 57,391,563 54,235,489
Prepaid expenses and other current assets 3,906,173 5,290,473
Deferred tax benefit 3,636,137 3,636,137
------------ ------------
Total current assets 217,067,231 169,913,790
Property, plant and equipment, net of
accumulated depreciation and amortization 38,648,574 30,712,102
Other assets 4,847,369 8,713,957
------------ ------------
$260,563,174 $209,339,849
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 50,000 $ 50,000
Accounts payable - trade 20,540,337 15,440,362
Accrued expenses and other current liabilities 26,776,041 19,140,265
Income taxes payable 6,198,281 1,370,934
------------ ------------
Total current liabilities 53,564,659 36,001,561
Long-term debt -net 150,000 200,000
Stockholders' equity:
Preferred stock - par value $.01, authorized,
2,000,000 shares; no shares issued
Common stock - par value $.10, authorized,
100,000,000 shares; issued 41,744,791 shares
at November 30, 1996 and 41,354,806 shares at
February 29, 1996 4,174,479 4,135,480
Additional paid-in capital 53,797,864 52,836,972
Retained earnings 149,426,732 116,716,396
------------ ------------
207,399,075 173,688,848
Less:
Common stock in treasury - at cost;
1,570,070 shares at November 30, 1996
and February 29, 1996 550,560 550,560
------------ ------------
Total stockholders' equity 206,848,515 173,138,288
------------ ------------
$260,563,174 $209,339,849
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE> 4
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
November 30, November 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $296,050,473 $232,821,187 $116,569,759 $90,818,599
Cost of goods sold 159,645,282 129,442,235 61,862,130 49,591,128
------------ ------------ ------------ -----------
Gross profit 136,405,191 103,378,952 54,707,629 41,227,471
Selling, general and administrative expenses 86,661,608 67,305,834 30,078,589 22,602,866
Net royalty (income) (2,809,418) (1,504,624) (1,227,017) (717,363)
------------ ------------ ------------ -----------
Operating profit 52,553,001 37,577,742 25,856,057 19,341,968
Interest income, net 1,964,226 1,771,639 750,672 501,307
------------ ------------ ------------ -----------
Earnings before provision for income taxes 54,517,227 39,349,381 26,606,729 19,843,275
Provision for income taxes 21,806,891 15,739,754 10,642,691 7,937,306
------------ ------------ ------------ -----------
Net earnings $ 32,710,336 $ 23,609,627 $ 15,964,038 $11,905,969
============ ============ ============ ===========
Earnings per share of common stock $ 0.76 $ 0.55 $ 0.37 $ 0.28
============ ============ ============ ===========
Weighted average number of shares of
common stock outstanding 43,253,975 42,603,758 43,252,574 42,475,190
============ ============ ============ ===========
Cash dividends per common share none none none none
============ ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE> 5
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
November 30,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 32,710,336 $ 23,609,627
------------ ------------
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 4,894,974 3,331,869
Increase (decrease) in cash flows as a result of changes
in asset and liability account balances:
Accounts receivable, net (28,564,262) (15,004,109)
Inventories (3,156,074) (3,712,744)
Prepaid expenses and other current assets 1,384,300 1,917,864
Other assets (1,340,588) (281,408)
Accounts payable 5,099,975 (376,480)
Accrued expenses and other current liabilities 7,635,776 4,600,818
Income taxes payable 4,827,347 3,980,346
------------ ------------
Total adjustments (9,218,552) (5,543,844)
------------ ------------
Net cash provided by operating activities 23,491,784 18,065,783
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (12,424,270) (11,327,249)
Long-term investment 4,800,000 (2,500,000)
------------ ------------
Net Cash used in investing activities (7,624,270) (13,827,249)
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (50,000) (50,000)
Proceeds from issuance of common stock 999,891 863,870
------------ ------------
Net cash provided by financing activities 949,891 813,870
------------ ------------
Increase in cash and cash equivalents 16,817,405 5,052,404
Cash and cash equivalents at beginning of period 61,047,522 49,153,556
------------ ------------
Cash and cash equivalents at end of period $ 77,864,927 $ 54,205,960
============ ============
Supplemental Information:
Cash payments for the periods ended:
Interest expense $ 15,409 $ 14,522
============ ============
Income taxes $ 16,975,046 $ 12,602,820
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 6
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
(Unaudited)
NOTE 1 - The accompanying financial statements have been prepared
without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations. These statements include all adjustments,
consisting only of normal recurring accruals, considered necessary
for a fair presentation of financial position and results of
operations. The financial statements included herein should be read
in conjunction with the financial statements and notes thereto
included in the latest annual report on Form 10-K.
NOTE 2 - The results of operations for the nine and three month periods
ended November 30, 1996 and 1995 are not necessarily indicative of
the results to be expected for the full year.
NOTE 3 - The Company utilized the last-in, first-out "Lifo" method for
inventories as at November 30, 1996 and February 29, 1996 and for
the nine and three month periods ended November 30, 1996 and 1995.
The "Lifo" inventory for the nine and three month periods ended
November 30, 1996 and 1995 are based upon end of year estimates.
Inventories at November 30, 1996 and February 29, 1996 consist
primarily of finished goods.
-5-
<PAGE> 7
NAUTICA ENTERPRISES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NOVEMBER 30, 1996
(Unaudited)
RESULTS OF OPERATIONS
For the Nine Months Ended November 30, 1996:
Consolidated net sales increased 27.2% to $296.1 million in the nine
months ended November 30, 1996 as compared to $232.8 million in the comparable
prior year period. The increase is due primarily to increased sales of Nautica
products through its wholesale and retail operations. Nautica's wholesale sales
increased primarily due to the expansion of Nautica's in-store shop program,
sales to new retail customers and to additional locations of existing customers.
The increase in Nautica's wholesale sales is primarily due to increased unit
volume rather than price increases. The increase in retail sales is attributable
to the opening of new stores and to an increase in comparable store sales.
Consolidated gross profit increased in the nine months ended November
30, 1996 to 46.1% of net sales, as compared to 44.4% in the comparable prior
year period. The net increase resulted primarily from a shift to the higher
margin Nautica wholesale products and to an increase in retail operations.
Selling, general and administrative expenses as a percentage of net
sales increased to 29.3% in the nine months ended November 30, 1996 as compared
to 28.9% in the comparable prior year period. The net increase resulted
primarily from the continuing transition into expanded warehouse and
distribution facilities.
Net royalty income increased by $1,305,000 in the nine months ended
November 30, 1996 as compared to the comparable prior year period. The increase
is a result of increased royalty revenue from new and existing licenses.
Net interest income increased by $193,000 in the nine months ended
November 30, 1996 as compared to the comparable prior year period. The increase
is primarily the result of higher cash balances.
The provision for income taxes remained constant at 40.0% of earnings
before income taxes for the nine month period ended November 30, 1996 as
compared to the comparable prior year period.
Net earnings increased 38.6% to $32.7 million in the nine months ended
November 30, 1996 from $23.6 million in the comparable prior year period as a
result of the factors discussed above.
-6-
<PAGE> 8
For the Three Months Ended November 30, 1996:
Consolidated net sales increased 28.4% to $116.6 million in the three
months ended November 30, 1996 as compared to $90.8 million in the comparable
prior year period. The increase is due primarily to increased sales of Nautica
products through its wholesale and retail operations. Nautica's wholesale sales
increased primarily due to the expansion of Nautica's in-store shop program,
sales to new retail customers and to additional locations of existing customers.
The increase in Nautica's wholesale sales is primarily due to increased unit
volume rather than price increases. The increase in retail sales is attributable
to the opening of new stores and to an increase in comparable store sales.
Consolidated gross profit increased in the three months ended November
30, 1996 to 46.9% of net sales, as compared to 45.4% in the comparable prior
year period. The net increase resulted primarily from a shift to the higher
margin Nautica wholesale products and to an increase in retail operations.
Selling, general and administrative expenses as a percentage of net
sales increased to 25.8% in the three months ended November 30, 1996 as compared
to 24.9% in the comparable prior year period. The net increase resulted
primarily from the continuing transition into expanded warehouse and
distribution facilities and increased retail development and marketing costs
associated with the accelerated expansion of the Nautica Competition business.
Net royalty income increased by $510,000 in the three months ended
November 30, 1996 as compared to the comparable prior year period. The increase
is a result of increased royalty revenue from new and existing licenses.
Net interest income increased by $249,000 in the three months ended
November 30, 1996 as compared to the comparable prior year period. The increase
is primarily the result of higher cash balances.
The provision for income taxes remained constant at 40.0% of earnings
before income taxes for the three month period ended November 30, 1996 as
compared to the comparable prior year period.
Net earnings increased 34.1% to $16.0 million in the three months ended
November 30, 1996 from $11.9 million in the comparable prior year period as a
result of the factors discussed above.
-7-
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended November 30, 1996, the Company generated
cash from operating activities of approximately $23.5 million. Increases in
accounts receivable and inventory of $28.6 and $3.2 million, respectively,
resulting from increased sales levels, were financed by cash generated from net
earnings, increases in accounts payable, accrued expenses and income taxes
payable. During the nine months ended November 30, 1995, the Company generated
cash from operating activities of approximately $18.1 million. Increases in
accounts receivable and inventory of $15.0 and $3.7 million, respectively,
resulting from increased sales levels, were financed by cash generated from net
earnings, increases in accrued expenses and income taxes payable.
During the nine months ended November 30, 1996, the Company's principal
investing activities related to the expansion of the Company's warehouse and
distribution facilities and the continued expansion of Nautica in-store shops.
Expenditures for the Company's warehouse and distribution facilities are
substantially completed. The Company expects to continue to incur capital
expenditures to expand the in-store shop programs. At November 30, 1996 there
were no other material commitments for capital expenditures.
The Company has $80.0 million in lines of credit with two commercial
banks available for short-term borrowings and letters of credit. These lines are
collateralized by wholesale inventory and accounts receivable. At November 30,
1996 letters of credit outstanding under the lines were $35.8 million and there
were no short-term borrowings outstanding.
Historically, the Company has experienced its lowest level of sale's in
the first quarter and its highest level in the third quarter. This pattern has
resulted primarily from the timing of shipments to retail customers for spring
and fall seasons. In the future, the timing of seasonal shipments may vary by
quarter.
INFLATION AND CURRENCY FLUCTUATIONS
The Company believes that inflation and the effect of fluctuations of
the dollar against foreign currencies has not had a material effect on the cost
of imports or the Company's results of operations.
-8-
<PAGE> 10
PART II
OTHER INFORMATION
Items 1 through 9. - All items are inapplicable except:
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K. None
-9-
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NAUTICA ENTERPRISES, INC.
By: Harvey Sanders
--------------------------
Harvey Sanders
Chairman of the Board
and President
Date: January 10, 1997
By: Neal S. Nackman
--------------------------
Neal S. Nackman
V.P. Finance and
Chief Accounting Officer
Date: January 10, 1997
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 77,864,927
<SECURITIES> 0
<RECEIVABLES> 75,686,984
<ALLOWANCES> 1,418,553
<INVENTORY> 57,391,563
<CURRENT-ASSETS> 3,906,173
<PP&E> 54,147,125
<DEPRECIATION> 15,498,551
<TOTAL-ASSETS> 260,563,174
<CURRENT-LIABILITIES> 53,564,659
<BONDS> 0
0
0
<COMMON> 4,174,479
<OTHER-SE> 203,224,596
<TOTAL-LIABILITY-AND-EQUITY> 260,563,174
<SALES> 296,050,473
<TOTAL-REVENUES> 298,859,891
<CGS> 159,645,282
<TOTAL-COSTS> 159,645,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 54,517,227
<INCOME-TAX> 21,806,891
<INCOME-CONTINUING> 32,710,336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,710,336
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
